Asia Markets recap: Hang Seng falls into correction

February 3, 2014, 6:35 PM ET

Reuters

Welcome to the Asia Markets live blog, a running account of what the region’s stock markets are doing, along with other news. Today, stocks tumbled after a sharp selloff on Wall Street. Japan stocks fell 4%, while the Hang Seng index fell into correction mode. Australia\’s central bank cut its dovish talk.

Australian stocks could not evit the inevitable after losses of more than 2% for the main U.S. indexes all but guaranteed a solidly lower open in Sydney.

Losses are sizeable more or less across the board, with gold miners the exception after a rally in Comex gold futures. (Read the details here.)

The big event risk of the day, of course, is the Reserve Bank of Australia decision due out at 2:30 p.m. local time (10:30 p.m. U.S. Eastern time).

The word around the campfire is that the RBA will hold fire but might drop the “ready to cut rates further if needed” language from its statement, given the above-forecast inflation recorded in the last quarter. We’ll see…

Japanese stocks were subjected to another beatdown Tuesday, losing as much as 3.2%. See more here. That decline comes after Monday’s fall of 2% that pushed the Nikkei Stock Average into a technical correction, or a drop of more than 10% from its previous peak.

The currency-sensitive Japanese market suffered as the U.S. dollar reached a more than two-month low against the yen, and even lost grip of the ¥101-handle before slightly recovering. The greenback, at this writing, was buying ¥101.20, compared with ¥100.92 late Monday in North America.

Hong Kong’s stock market reopened after the Lunar New Year holiday, with the Year of the Horse galloping into the bourse, only to be mauled by bears.

Cathay Pacific? Swipe, down 4.4%!

Standard Chartered? Growl, down 5.5%!

But the stand-out loser was Lenovo, plunging more than 12% as investors reacted to everything from the electronics major’s deal to buy Motorola, to reports of a Vaio JV with Sony, to various downgrades to its shares. (See more details here.)

Andrew Sullivan of Kim Eng Securities says Hong Kong has a lot more selling to do before the correction passes:

“Last year, we started the Year of the Snake at around 23,400 level (off the 24k January high), and after a short rally trended lower into March. This year, we’ve also seen a 24k high but are starting around 21,562,” he wrote ahead of the market open, adding that we are “unlikely to see the normal Chinese New Year rally.”

“A lot of people talking about waiting for the 20k support before buying,” said Sullivan.

China might soon loosen its tight grip on its banking sector. The official Xinhua News Agency reported Monday that it’s an inevitable choice for China’s financial reform to allow banks to fail.

It quoted Yan Qingmin, vice chairman of the China Banking Regulatory Commission, as saying that the government would let market force play a larger role in the banking system and allow commercial banks to “go out of market” if they turn involvent.

The report also said that as China deepens its financial reforms, it would further open up its banking sector to private investors and allow fully private banks.

In a potential move to protect depositors against the risks of bank failure, the People’s Bank of China — the nation’s central bank — said last week that preparatory work for China’s deposit insurance scheme is “basically ready.”

Xinhua quoted experts as saying that the central bank might launch the scheme later this year.

Meanwhile, shares of the top mainland Chinese banks traded sharply lower in Hong Kong, though not much worse than the broader market. Bank of China lost 2.1%, China Construction Bank fell 2.8%, and Agricultural Bank of China retreated 2.4%. The benchmark Hang Seng Index was down 2.3%.

The Nikkei Stock Average fell for a fourth consecutive day, ending down by a hefty 4.2% at 14,008.47. You’ll have to go back to June 13 to find a bigger percentage loss — that’s when the benchmark index dropped 6.4% and returned to bear-market territory.

What happened that day? The U.S. dollar fell nearly two full yen against Japan’s currency, below the ¥94 level, following three days of losses on Wall Street on Fed-tapering concerns.

While not as severe as the June decline, the U.S. dollar did fall on Tuesday, revisiting a two-month low against the yen below ¥101.

The index has fallen nearly 11% since Dec. 2, when it hit a high of 24,038.55. It closed at 24,038.55 on Tuesday. But it’s not the only Asian index to recently earn that distinction. Japan’s Nikkei Stock Average moved into correction on Monday.

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